Futures Point To A Strong Open

• October 27, 2003
• TradingMarkets Editors

INTEREST RATES

OVERNIGHT
CHANGE to   4:15 AM :BONDS -16 The Treasuries have certainly been impressive of
late, but we can hardly suggest that trades buy current levels, especially given
the conditions of certain technical readings. From the COT report it would seem
that the fund and small specs have been selling into recent strength, possibly
because they are convinced that the long-term trend is still pointed down and
that the current rally is simply an opportunity to get short at an inflated
price level. In our opinion, significant additional gains from current prices
have to be justified by a real threat to the recovery and that these levels
should be sold.

STOCK INDICES

OVERNIGHT
CHANGE to   4:15 AM:S&P+160 DOW -4  NIKKEI +118 FTSE +17 The market did a good
job of rejecting last weeks lows but we are not sure if the market is ready to
forge a solid low. The earnings parade continues this week, but considering the
action last week, it would not appear like the market is prepared to get its
direction from the earnings reports. Unlike last week, this week promises a much
more active economic report slate and an update from the Federal Reserve Open
Market Committee.

FOREIGN EXCHANGE

Dollar: There seems to be
plenty of expectation that US officials are poised to press for a change in
Asian exchange rates. In fact, testimony to Congress is expected that
specifically targets the exchange rate of China and Japan. On the other hand,
the US Administration seems to want to confuse the issue with repeated
statements that they favor a strong Dollar. Certainly it is possible to have a
strong Dollar and rising Yen and Yuan rates but that is a difficult task in the
current environment. We have to think that the bias remains down in the Dollar,
especially after the new low move last week and the ongoing negative outlook
toward the US recovery. In fact, on a rise to 92.10 we would sell the US Dollar
looking for an eventual move to new contract lows. US housing numbers early this
morning are expected to be weak and that should take some of the early upside
out of the Dollar.

EURO: The
Euro made an extremely negative technical trade overnight but since it managed
to reject a large portion of the overnight losses, maybe the action was an
anomaly. However, in order to see a bullish trend in the Euro it will have to
regain 117.67 in the early going today. On the other hand, a slide back below
117.25 could be considered extremely negative to the Euro. The overnight
weakness continues to highlight the large risk of being long the euro, even if
the trend appears to be up! 

YEN:
After some significant weakness last week and the potential for a top, the
action this morning negates the hopes of the bears in the Yen. In fact,
considering the talk on Capitol Hill, we suspect that the Yen is primed to shoot
into new contract highs this week! Critical support is now seen at 92.12 and the
upside targeting is seen at 93.00.

SWISS:
Too much overhead resistance in the Swiss and like the Euro, the Swiss posted
some very disconcerting overnight weakness. We have to think that the Swiss is a
buy on a break to 75.15 and a sell on a rally back up to 76.48.

POUND:
The up trend in the Pound is primed to continue but the risk and reward of being
long is pretty significant. We suspect that the Pound will be able to hold above
168.60. In order for the Pound to soar to new highs, the Dollar will have to see
negative economic readings and lower stock market action. 

CANADIAN
DOLLAR: Trend line support comes in at 75.83 and then again down at 75.19. There
is no reason to suspect that the up trend is set to end soon! +

METALS

OVERNIGHT CHANGE to 4:15
AM:GLD-2.20,SLV-3.0,PLAT+4.9, CP +30 London A.M. Gold fix $386.75 +$2.15 LME
COPPER STKS 528,450 tons -2,950 tons COMEX Gold stocks 2.81 ml -100 oz Comex
Silver stocks 115.0 ml oz Unchanged  OVERNIGHT: Profit taking in the Asian trade
a surprise after Friday’s ris

GOLD: The
gold market certainly got a direct lift from the weakness in the Dollar last
Friday but that same support is apparently absent in the action this morning.
The COT report showed the fund long to be 107,000 contracts and the funds were
thought to be major buyers late last week. In our opinion, the fund long could
reach 120,000 contracts before it is in danger of tapping out its buying
capacity.

SILVER: A
rejection of the recent highs in silver is troubling for the bull camp. In fact,
a decline back below $5.098 in December silver puts the market back below
critical moving average support. While silver hasn’t been acting like the macro
economic case is relevant to the bull case, we have to think that silver is at
least partially dependant on better physical demand for higher prices.

PLATINUM:
The up trend pattern remains intact but a close below $733 could be very
damaging to the bull trend. The weekly COT report showed almost no change from
the prior week, but that still leaves the market is slightly overbought. In
fact, if the macro economic outlook continues to deteriorate, the platinum
market could be in for the most significant corrective move since the late
September slide.  

COMMITMENT OF TRADERS ANALYSIS – FUTURES & OPTIONS  Oct 14 – Oct 21, 2003

               LARGE SPEC          COMMERCIAL           NON-REPORTABLE

                 NET                  NET                   NET

            POSITION   NET CH    POSITION    NET CH    POSITION   NET CH

SILVER          26456     3262      -54399     -2991       27943     -271

COPPER          47875     -267      -59857      1252       11982     -985

GOLD           107313     7651     -153173    -10557       45860     2906

PLATINUM         5178      128       -6415       -17        1238     -110

 

There
continues to be talk of Chinese copper sales and that is certainly enough to
give the bears the edge, especially after the action last week. It should be
noted that copper prices in Asia were mostly unchanged and that exchange stocks
continued to COPPER: decline and that suggests most of the bullish fundamentals
are still in place. Seeing the Chinese government evoke some sales might be a
way of taming the recent price rise but any sign that they are back into the
market on the buy side, would instantly launch prices back to the recent highs.

CRUDE COMPLEX

OVERNIGHT
CHG to    4:15 AM   :CRUDE -7   ,HEAT-33  ,UNGAS-31 We get the sense that the
energy market remains in a prevailing bull trend because negative news isn’t
controlling prices the way one would expect in a two sided or bearish
environment. Most the time the trade seems to be expecting the November
production cut implementation to support prices.

NATURAL GAS

So far
cooler weather has failed to provide a bottoming incentive for February natural
gas. The inventory numbers last week were just big enough to force some of the
existing small spec long position out of play.